Category: Options school

Options options have found themselves to be increasingly popular over the past years and the 60-second options trade has found center stage among the other type of options trades.

In trading, every minute is a window of opportunity to make profit. 60 seconds can easily turn a negative value into a positive. 60-Second options trades are trades that expire within a minute. In simple words, it means you will know whether you lose or profit after 60 seconds.

Get Rich Fast

The main reason on why people love this 60 second action is that they can get rich extremely fast. Most 60-second options trades provide an average of 70% return on winning.

Imagine you invest $5 and you win every time you place a 60-second options trade. If you invest $5 in the first minute and put back the full amount after winning and do this for an hour, you will end up with over $40million. Sounds crazy doesn’t it? But that only happens in the perfect scenario. We all know that even the best of traders will also have a very hard time pulling this off. However, that doesn’t mean 60-second options trades are not profitable.

With proper experience and mindset, you can indeed accumulate profit over time. Taking into consideration the risk factors and the amount of money you have for investment, turning it into extra income is certainly possible.

The Downside Of 60 SEC Expiry Time

If every minute is a losing trade, your hard earned money could magically disappear in a flash. Making fast decisions is not equal to making the best decisions. Due to the nature of 60-second options, you can easily miss out many better opportunities out there as the trades comes and goes so quickly. On top of that, traders can also easily make the mistake of putting more on each trade after each lost which can end up hurting them even more.

60-options can be so fun but dangerous as well! Before rushing into things, gather more experience and practice!

The Double Red Strategy

If you use the double red strategy, you are using a system that looks for short term reversals in price. These reversals are signaled by both price action and resistance. When two bearish candles form after a test of a resistance level, then a strategy may be used. You can see what we mean in the chart below:

Pick an asset that you want to follow. Watch the market and chart until you see the first red bar. Now wait for a second red bar to appear.

If the second red bar closes lower than the first red bar you spotted, then you’ve found the pattern!

What will then usually follow is that a third red bar will appear. This third bar will go even lower than the second bar. When this happens, it is time to place a put option on the asset.

Other Key Points

This example is modeled with a 5 minute chart and an option expiry time of 5 – 15 minutes.

Beware! This strategy is not best suited to volatile markets.

Do not use this strategy when big news events are taking place. These events can disrupt the trend.

The Pinocchio Strategy

Remember the children’s character Pinocchio? His nose would grow much larger than his small body if he told a lie.

That is what you are looking for with this strategy: a small body, and a long shadow (nose). Other names for this pattern are: the shooting star, the hanging man, the hammer or the inverted hammer.

When the shadow (nose) is longer than the body that is an indication of a “lie” in the market. It signals that a trader should trade the opposite way to the direction of the shadow.

Other Key Points

Time frame to analyze: 1 hour – 4 hours

Expiry time to use: 5 minutes – 15 minutes

Do not be tempted to use the 60 second expiry time for your options if using this strategy!

Do no trade in a neutral (directionless) market if using this strategy. For a true Pinocchio signal, an uptrend must form. Trying to execute this strategy in a neutral market increases your risk a long way.

For Advanced Traders

The entry point that you begin your trade with will vary. Some traders would rather be patient and wait for a withdrawal / retracement to the 50% Fibonacci level of the Pinocchio bar.

Other traders are happy to enter their trade as soon as the Pinocchio bar closes. A longer “wick” or upper shadow will indicate that selling pressure from the market is very strong. On the other hand, a long “tail” or lower shadow suggests strong buying power.

The 1-2-3 Forex Trading Strategy

After an time when a commodity or currency moves up strongly, you can start looking for the 1-2-3 forex trading strategy.

First of all, mark the top of the first strong move up with a “1”.

Once you have seen a counter move, or a move in the opposite direction, mark the bottom of that move with a “2”.

Now, if the next new move up does not go past where you have marked “1” and starts turning down once again, mark the highest point of this new move up with a “3”.

The pattern is now complete. But you must be aware of a very important rule: the price must move down to “break” the low created at point “2”. If that happens, then you can execute the trade by placing a “put” option.

Other Key Points

For this pattern, use an expiry time that is the same as the time frame of the chart you are using to identify the pattern.

Two is better than one – it is safer to open two trades with shorter expiry times for this strategy, rather than one longer term trade.

The double red strategy requires traders to spot:

Long term fundamental changes

Short term reversals in price

Sudden price spikes

Correct!Wrong!

The Pinocchio strategy requires traders to identify a trend over what time frame?

1. Choosing Short Expiry Times

Many beginners are lured into the super short expiry times of 60 seconds or less. Don’t do it! You may get a faster outcome, but that outcome is also much more likely to be a losing outcome. If you are trying to make strategy and analysis based predictions (rather than gambling bets) then expiry times of at least 15 minutes are advised.

2. What You Don’t Know About Bonuses

Many brokers will offer bonuses when you deposit cash with them. Some of these bonuses can be as high as 100%. However, many people fail to read the terms and conditions.

That leads to stories where people deposit some money, make some trades and make profits, but cannot access their money! That’s because the rules regarding bonuses are designed to protect brokers, not traders.

For instance, some brokers will require that “bonus” funds are traded 20 – 30 times the value of the first bonus before you can withdraw it. Some even stricter brokers will require that all of these trades must be made within a specified time frame, such as 3 months. As you can see, it is very difficult to meet these rules, so be very careful about being attracted to a broker just because of attractive bonuses!

3. Brokers Profits

Don’t fall into the trap of blaming brokers for your trading losses. For every losing trade there is a winning one. While there are some dishonest options brokers, many are honest and legitimate businesses.

The key is finding a good one who is accredited, has a good history and strong reviews from its clients. A good place to start is one of our TOP options brokers.

A key risk of choosing an expiry time that is too short is:

It does not allow any trends to form

It is more like gambling than analysis

Both of the above

Correct!Wrong!

Bonus funds offered by some online brokers can be a trap because:

They are not real cash

They have many rules and conditions attached to them to prevent the trader from withdrawing money

They are all scams

Correct!Wrong!

A key thing to look for when searching for a reputable broker is:

Good online reviews from clients and accreditation from a reputable body

To get options trades right and make profits, you will have to include technical analysis in your process. Just looking at a simple line chart is unlikely to be enough here. Successful traders will use independent candlestick charts as they will reveal more in-depth data.

When you are looking for a broker, look for one that offers the ability to toggle to candlestick charts within the main trading interface. Dual screens such as two computer monitors or a computer monitor and a tablet computer (or even your phone) can also help you set up a optimized workspace.

If you look further than just the basics, you will find some more complex candlestick patterns.

Doji – a doji occurs when the closing price and the opening price are the same.

Long legged doji – after a series of smaller candlesticks, a long legged doji may indicate a change in a trend that is about to occur.

Four price doji – this occurs rarely, and happens when the low price and the high price are the same as one another.

Being able to read a candlestick chart is part of the analytical framework of:

There are a range of options that you can choose for your expiry times when trading options. Many beginners are lured by the temptation of fast outcomes, and choose very short expiry times. However, it’s important to understand that this will result in the riskiest investments.

The majority of options will expire in periods between 30 seconds and 12 hours. There are also longer term options of 7 days or more. The biggest difference is in the level of predictability that you will experience. The shorter the time frame, the more likely it is you are just guessing. The longer the expiry time, the more likely it is you are going to be able to make a logical forecast.

Predicting which way a price will move within a short time frame like 30 – 60 seconds is near impossible. This is more akin to gambling on “red or black” at a casino. However, if you believe you have a information advantage, these situations can also be profitable.

Add News Event To Your Strategy

How does a 60% – 90% chance of getting your prediction right sound? It’s possible. For example, last year, it was well known the British referendum about European Union membership would occur mid year. Currency traders who thought about this event were able to place trades that predicted that the British Pound would fall in the lead up to the vote, as markets dislike uncertainty. By applying simple logic to a news event, traders were able to greatly increase their chances of making a profit.

Technical Strategies

When expiry times are extended beyond a few minutes, technical analysis becomes very useful. Technical analysis allows you to predict future price movements based on how prices behaved in the past.

Recognize a Trend

To confirm a trend, it is advisable to use a candlestick chart. It is also a good idea to use a longer chart time frame than your expiry time, as this will let you forecast with more accuracy. Chart time frames of 1 hour or more are best suited to this purpose. However, extreme short term traders may use candlestick charts that are as short as 1 minute – 15 minutes. 1 minute charts are best used for entry and exit signals. 15 minute charts are best used to check, trend, support and resistance levels, and to confirm these patterns. If you are trading options with 15 or 30 minute expiry times, then 1 and 4 hour candlestick charts should be used to check your forecasts.

So just remember, the rule of thumb is to use a chart that is a longer time frame than your option expiry time!

A longer term option is one that:

Expires in 1 hour or more

Expires in 1 day or more

Expires in 1 week or more

Correct!Wrong!

Making a options trade with an expiry time of 60 seconds is likely to get you odds of:

50:50

75:25

90:10

Correct!Wrong!

You can increase your odds of success by:

Watching out for macroeconomic events and news and making the correct assumptions

Trade Options At High Volatily

Knowing when to trade options will greatly increase you chances of making great profits. Trading is open 24 hours a day, 5 days a week. But that definitely does not mean you should trade and any given time of the day or night to try and make profits!

Different days, and different times within days see different trade volumes and liquidity. High volatility gives you the chance to get the best returns on your trading.

Market Overlaps

There are several great financial hubs in the world. So it makes sense that the financial market as a whole is most active when these great hubs trade at the same time. These times are known as market overlaps.

For example, when the trading sessions of London and New York or Hong Kong / Sydney / Tokyo / London overlap, then the market volume of trades are much much higher.

Also, when you have more than one active market, then increased market volatility will likely come with it. For a trader, that means that price moves occur in a more predictable and clear direction than when there are low volumes.

That also means that it becomes more likely that your analysis is correct, if you also use longer time frames. When it is low volume time or “off peak” trading hours there is very little price movement of volume (also called liquidity). That results in the opposite situation, where trends become harder to predict with accuracy. That, in turn, increases the risk to your capital.

Best Days to Trade

Research shows that the largest movements is the major currency pairs and commodities happen on Tuesdays and Wednesdays. Fridays are generally busy trading days as well, as many large traders will try and close their positions before 12:00 pm that day. The second half of Friday is typically much lower volume than the first half.

A market overlap is when:

The trading sessions of two financial markets trade at the same time

When a bull market becomes a bear market

When there are more buy orders than sell orders

Correct!Wrong!

The highest volume market overlaps occurs when which two trading sessions overlap?

London and New York

New York and Sydney

Correct!Wrong!

The days with the highest trading volumes are:

Options options work to let’s you trade stocks, stock indices, commodities and currency pairs with a FIXED rate of return. You have to decide whether you think the value of an asset it going to go up (a call) or go down (a put) after a certain time period. Here’s a simple 4 step strategy for you.

1. Choose A Chart Type

No matter which asset you choose to trade, the chart type is so important. You have three options: line, bar, or candlestick charts. The last one works like a charm as it shows trend reversals and continuation patterns. Various candlestick patterns give the next move the market will make:

Bullish or bearish engulfing

Piercing or dark-cloud cover

Morning or evening stars

Doji candles. All these tell you much about future prices and a trade results.

What if the trend already started?

2. Identify A Market trend

Trend indicators do the job for you. Simply pick the best of them, put them on a chart, and stop the underlying trend. If bullish, wait for a pullback to get in. If bearish, look for a spike to give you the best striking price. Moving averages and Bollinger Bands give great signals for the perfect striking price. How about the expiration date?

3. Check the Time Frames

Imagine you spot a bullish trend on the daily time frame and the market pulls back for a nice call option setup. Choosing a five-minute expiration date for your option is foolish. Be wise and mind the time frame, leave the market room to move for your option to expire in the money.

Imagine you form a view that the price of oil will fall. You then take $100 from your trading account and place a “put”. If you are right, and the price falls, you will get a fixed payout. In this example, the payout is $175. It does not matter whether the price of oil crashes $10 or just falls by $1. Either way, you will get the payout. However, if the price of oil rises at all, then you will lose your original investment of $100. You limit your risk by choosing the payout and loss percentage that suits you. For example, some brokers will give an option where you can choose to lose only 75% of your investment. The flip side is that if you are correct, you can only get a 75% payout.

Conclusion

Successful traders master fear and greed. To make it in this business, you must stay ahead of the game. The right analysis would not make you money, but the right analysis with the write expiration date will do.

When to Choose Options

If you have a higher risk tolerance and are keen to begin straight away, then options might be more suited to you. Forex trading generally takes a little longer to learn, and the platforms are a little more difficult to understand.

In contrast, options are very quick to learn and you downside is lower. In fact, in some cases you can even get back around 15% on losing trades! Also, the rate of return is fixed, so you will know the exact risk from the beginning. This is not the case with forex

When to Choose Forex Trading

Do you have spare time, and do you enjoy learning complex new concepts? Then forex trading might be for you. That’s because trading forex successfully means that you need to understand both fundamental and technical analysis.

Forex also requires more up front capital from traders to get starting. However, forex is a global and well respected industry, and you will learn concepts and skills you can apply other areas too.

Simple To Learn and Use

Many financial instruments can be complex, confusing and difficult to understand. Options options are far simpler. The reason they are simpler is because all you need to do is form a view on what the price of a defined asset will do.

Compare that to regular options. These require you to be confident on the price movement, but also the magnitude of that price movement.

Faster Results

Options options are ideally suited for today’s fast paced modern world. That’s because you can have contracts that are as short as 60 minutes. There are even rapid contracts that are only 60 seconds long!

That means that a trader is able to access many more investment opportunities per day. The frequency also offers far more flexibility than traditional options.

Manageable Risk

Forex is unpredictable and with that unpredictability comes risk to your investments and your trading account. However, with options your downside is limited. You can only lose the amount that you chose at the beginning to commit to that specific trade.

Low Fees

Fees are the number one reason that investment returns go from being good to only average. But unlike most financial products, there are options are usually fee and commission free. Instead, brokers make money on the difference between what they collect from loss making trades and what they pay investors for winning trades.

Options options require you to:

Have a detailed understanding of fundamental trading concepts and likely price movements

Be confident about the magnitude of a price movement

Simply form a view on what the price of a defined asset will do

Correct!Wrong!

What is the shortest contract available in the options market?

60 days

60 seconds

60 minutes

Correct!Wrong!

Options options trading is often:

Fee and commission free

High fees but no commission

Standard commissions but low fees

Correct!Wrong!

WHY TRADE OPTIONS

Congrats, good job! 🙂

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